Today (April 5th), CJI DY Chandrachud, Justices JB Pardiwala and Manoj Misra, granted the Central government’s request to transfer petitions from various High Courts. These petitions challenge notices issued by Goods and Services Tax (GST) authorities to gaming companies for alleged tax evasion and underpayment. A total of 27 petitions from 9-HC’s were transferred to SC.
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NEW DELHI: The Supreme Court today agree to the Central government‘s request to consolidate several petitions, which were previously under review in various High Courts, challenging the notices served to different gaming companies by the Goods and Services Tax (GST) authorities.
These notices were related to allegations of tax evasion and underpayment of tax by these entities. The amalgamation of these cases reflects a strategic approach to address the complex legal challenges surrounding the taxation of online gaming activities within a unified legal framework.
Presided over by Chief Justice of India DY Chandrachud, along with Justices JB Pardiwala and Manoj Misra, the court ruled for the transfer of 27 petitions that had been distributed across nine High Courts nationwide. This decision aims to streamline the legal process and ensure a cohesive interpretation of tax laws as they apply to the burgeoning online gaming industry.
“Let reply be filed by April 27, 2024,”
Apex court ordered.
The Supreme Court has instructed that these transferred cases be aligned with an ongoing plea by Gameskraft Technologies Private Limited, a significant player in the online gaming sector. This directive sets a timeline for the involved parties to file their responses by April 27, 2024, marking a critical step towards resolving the overarching legal questions about GST implications on online gaming.
In a pivotal move back in September 2023, the Supreme Court had intervened to stay a judgment from the Karnataka High Court. The lower court had annulled a GST department notice against Gameskraft, which demanded payment of Rs 21,000 crore.
The High Court’s rationale was grounded in the interpretation that online games, such as Rummy offered on Gameskraft’s platform, did not constitute ‘betting’ and ‘gambling’ activities and thus fell outside the taxable bracket under the current legal framework. This interpretation and the subsequent decision have been contested by the tax authorities, highlighting the nuanced debate over the taxable nature of digital gaming activities.
Further contextualizing the scale of the issue, the Ministry of Finance disclosed to the Rajya Sabha in December 2023 that a total of 71 show-cause notices involving GST claims amounting to Rs 1,12,332 crore had been issued to various online gaming companies for the fiscal years 2022-23 and 2023-24 (up to October 2023).
“71 show cause notices involving GST to the tune of Rs. 1,12,332 Cr. have been issued to online gaming companies during financial years 2022-23 and 2023-24 (upto October 2023). As these notices are pending adjudication, the respective GST demand is not yet determined under the provisions of CGST Act, 2017,”
-the government said in response to a question of Member Parliament Sushil Kumar Modi.
This revelation, in response to inquiries from Member of Parliament Sushil Kumar Modi, underscores the significant economic and regulatory dimensions of the controversy. As these cases proceed through adjudication under the provisions of the CGST Act, 2017, the gaming industry and regulatory bodies await a critical legal examination of GST applicability to online gaming, an outcome that will likely redefine the financial and operational landscape of digital entertainment in India.
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